I am 100% shareholder of a corporation and operate from a home office. Which software should I use for Tax Filing ? Is this expense deductible as an expense ?

[Mark45]

Which software do I need to buy ?

Does the software advise me how to depreciate and amortize if I input the dates ?

Does it automatically advises the various class of expenses ?

[Delphision · Accepted solution]

You will have to use TurboTax Business Inc. in order to file a T2 return.  The present year version does year ends from Sept 2014 to October of this year.  If your year end is after that date, you will need to wait for the next version.

The software does automatically depreciate items, if entered correctly on the schedule 8.  You have to input the class, a description and an opening balance.

For a T2, you enter the totals from your balance sheet and income statement, which presupposes you have some kind of accounting software.  As a result, since your purchase of the tax software would normally be entered in "office supplies" you would be able to claim it.

[Mark45]

Thank you and this was greatly helpful. I have two additional questions and would be grateful if you can provide some answers when convenient.

a) Does this Turbo Tax Business also cater to Home Use Deductions and is there is a calculator to do that or we simply input the data ?

b) On depreciation, I have a specific question. If this is the first year of purchase and the items were purchased on a specific date, can the software help at arriving at the depreciation YTD ? Specifcally, if the company was incorporated on 1 Jan 2015 and 1 Jan 2016 is the year ending, but the items were purchased on odd days in Feb, March and April, does the software help in arriving at the depreciating figures or whether I have to hire an accountant to do these calculations ?

Once again, many thanks for your assistance in advance.

Mark

[Delphision]

Hi Mark:
I haven't used the TurboTax version of the corporate T2.  I spend my days working on the professional grade software.  It should be very similar.  
1.You would enter the cost of the asset as an addition for the year.  That should trigger it to calculate the 1/2 year rule.  Any pro-ration may have to be handled manually. For next year, it will just be 30,000 minus the previous year amortization x 30%
The best thing to do is to open up an Excel or OpenOffice spreadsheet and put in the calculation for the amortization.  If it was a vehicle for $30,000 the calculation would be (30000x30%/.5)/365x the number of days.

2. There is probably no calculator for home office, because, as I mentioned, you are entering balance sheet and income statement on a T2.  It is nothing like personal tax.  Again, you should do a spreadsheet and add the total cost of all utilities, mortgage interest or rent to get a total cost.  That amount is the multiplied by the square foot calculation.  Use the number of square feet of the home office divided by the total square footage of the residence to get the percentage.  You then multiply your home costs by that percentage to get the home office amount.  Normally, you would then do a journal entry to add the amount to your office expense in your accounting software.

3.  You cannot have a year running from January 1, 2015 to January 1, 2016.  It would have to end on December 31, 2015.  Keep in mind that corporations do not necessarily have to have a year end on December.  If you are in retail sales, and have inventory to count, you want that to happen during the slow season.  In that case, if you wanted a year end on February 28, you would file a nil return for the period from the date of incorporation, January 1 for instance, until February 28.  Then your fiscal year would run from March 1, 2015 to February 28, 2016.

4.  Accountants serve a number of purposes aside from doing the tax return.  Your accounting is checked to make sure that you are not doing something that will get you audited.  Presumably you purchased your shares in the corporation through the shareholder loan account.  This is based on the type of shares and value placed on them at the time of the incorporation.  Hopefully, you have more than one class of shares.  Your incorporation cost and certain other legal fees do not go in expenses, they go on the schedule 10.
Accountants can help you determine if you should pay yourself wages or dividends.  You can't just take money out of your company without paying tax on it either as a result of a T4 or a T5 for dividends. You are legally obligated to file one or the other by February 28 of each year.
If you were working as a sole proprietor before you incorporated, you must keep all of that separate from the corporation.  Sole prop files on their personal tax, not the corporation.

Ask any questions you need.

[Mark45]

Thank you very much. You saved me a lot of trouble and you are a SuperStar !!! Much appreciated.

[Mark45]

One last question. My incorporation date is actually 14 Jan 2015. So does that mean that my year end will be 13 Jan 2015 or 31 Dec 2015 ?

[Delphision]

If you want a December 31 year end, you will file a short fiscal year from January 14, 2015 to December 31, 2015.  Give this some thought.  Once you file for the first time, your year end is virtually set in stone.  If you decide to change it, you will have to get permission from CRA to do so, and come up with a decent reason for it.  
You should already have a business number from CRA.  It will be a different number from any prior business.  You might need a PST number for the corp, and you might be required to open a WCB account.   Applications for these items are all available on the CRA and provincial websites.  Corporations are a great deal of work and expense.

[Mark45]

Thanks very much and well noted. Once again, very grateful that you are taking the time to assist here. Have a nice day.

[Delphision]

Best wishes. 🙂

[goldenlinestranslation]

Does business incorporated cover the fiscal year ending February 28, 2022?